no third solution

Blogging about liberty, anarchy, economics and politics

What Does a Libertarian Economy Look Like?

July 24th, 2010

Quoth the Faux Capitalist, on libertarianism and “Austrian” economists:

For me, a libertarian is someone who believes that limited government is the most likely to protect the liberties of the people whom it governs, and that shouldn’t necessitate an economic system based on a scarce resource such as gold.

Any economy (I do not prefer the term “economic system”) is not “based” on currency. It’s based on the exchange (often consisting in currency) of scarce resources. Some resources happen to be more scarce than others. Historically it is those resources, in particular the precious metals, that have been chosen as monetary commodities. This is so for a number of reasons I need not explain at present.

So it’s a gross misunderstanding, I think, to characterize the Austrians as gold-fetishists (although there are certainly some worthy of that). In fact, it’s not advocacy of an “economic system”, but rather a belief that in the absence of any coerced “system”, a free market settles upon a common medium (or perhaps, media) of exchange.

Anyone who advocates an “economic system” based on anything other than freedom and exchange is not a libertarian.

What Does a “Dismal” Quarter Look Like for Goldman Sachs?

July 20th, 2010

Goldman SachsGoldman Sachs had a relatively dismal Q2 with earnings per share dropping 83% to 78 cents. But “relatively” is what matters. Relative to Q1, where in 63 trading days GS did not lose even once, and according to their SEC filings, they netted at least $100M on 35 different days. According to Zero Hedge, “the statistic probability of this event is itself statistically undefined. Goldman is now the market…Goldman is the house, it controls the casino, and always wins.”

A perfect or near-perfect record of profitable trading even during the worst of times, GS is a de facto monopoly earning risk-free profits; those risk free profit are someone else’s loss, and that someone else is you. It will be interesting to see their SEC filings, particularly the 10-Q when that’s available, to see how “dismal” this quarter really was for GS. My guess: not very.

If the recent past is any indicator, we need only look to their 2Q 2009 filings.  There was a lot of fallout after the total financial implosion in late 2008 and second quarter of 2009 was marked by some tumult in the markets. During that quarter, GS brought in close to $5 Billion, and lost money only on two trading days.  They had forty-six days netting over $100M.

But there’s nothing wrong with the economy (LULZ!). This isn’t a malfunction. This isn’t an anomaly.  This is exactly what’s supposed to happen.  The markets are doing exactly what they’re designed to do, which is to “concentrate real economic power for the State and its beneficiaries”.

Proof You Are Being Exploited

July 16th, 2010

Ever wonder why we’re still working 40 hours per week? As if that’s some sort of magic equilibrium between labor/leisure that has just organically emerged over the centuries? It’s insanity, really. And evidence that we aren’t free to choose. I touched on this before, commenting that all of our productivity is wasted:

The average worker is several orders of magnitude more productive than he might’ve been a half-century hence… We’ve got more more people doing more jobs, producing more things and still we’re working 40 or 50 or 60 hours a week.

And this doesn’t strike anybody as being just a little bit insane?

In a free market where you aren’t being exploited there is a continuum, a trade-off between labor and remuneration. Let’s say you figure out some way to do your job in a quantifiably better/faster/more efficient manner. Assume for this thought experiment that you are able to double your productivity.

In a free market there is a real tradeoff between labor, leisure, and pay

What would happen in a free market? You could cut your work-week in half and achieve the same output for which you would expect the same remuneration. You could keep your work-week the same, in which case you would expect greater remuneration (perhaps as much as double your current pay). Or any combination along that continuum which would result in some amount of less work, and some amount of relatively (but often absolutely) greater remuneration.

What happens in practice? If you develop some brand new process which, compared to the old process, requires half as much labor, the odds are practically zero that your employer will offer you to begin working a 20-hour work week for the same rate of pay, despite the fact that by working 20 hours you produce the same quality and quantity of output. And it is equally unlikely that they will double your salary, which would justify a 40-hour week because you now produce twice as much and as good of output as before.

Probably what will happen is that some other sap will get canned. You’ll have to absorb at least part of his workload but you will not absorb any of his salary. The corporation will absorb his salary as profit. If you’re fortunate, you’ll get a small raise or spot bonus.

Generally speaking, for a job well-done, under budget, ahead-of-schedule, and to quality, the only reward is more work. We don’t get to enjoy more leisure if we produce more and better and faster, we just have to work even more. For the most part, productivity is severely penalized.

What is the alternative? I do not believe for a second, that given all of the technological advances in the last 200 years, a majority of people in the developed world would continue to work 40 hours a week, if they had any say in the matter whatsoever.  Imagine a 20-hour work week.  Imagine creativity unleashed. Imagine what would happen to progress and productivity, if only people were actually rewarded for the work that they do.

no third solution

Blogging about liberty, anarchy, economics and politics